Data centers in North Dakota have received millions in sales tax breaks

Data center owners in North Dakota have reaped tens of millions of dollars in state sales tax breaks in the last two years, figures that have ballooned as public scrutiny has intensified on data center projects.

The Legislature’s interim Tax Reform and Relief Advisory Committee on Wednesday heard a series of reports about data center tax exemptions and incentives, including what North Dakota and other states offer. State Tax Commissioner Brian Kroshus outlined exponential growth in sales and use tax exemptions for data center owners on information technology equipment, such as computer hardware, servers, routers, cooling systems and other infrastructure. 

Those sales tax breaks, which are not for construction, ranged from $5.4 million in 2021 to $7.8 million in 2023, then leapt to $15.3 million in 2024 and more than $65 million last year. 

“It’s a number that I think will grow without question,” Kroshus told the panel.

Residents voice concerns over Mandan data center during town hall

Data centers are huge facilities housing computers that handle everything from financial transactions to email to artificial intelligence.

The 2015 Legislature approved the original tax exemption, with the current version set by the 2021 Legislature, Kroshus said. 

“I don’t think anyone at the time, the Legislative Assembly, could have envisioned what this would become just 11 years later,” Kroshus said. 

In a 2015 House floor debate, bill sponsor Rep. Mark Owens, R-Grand Forks, who died in 2024, said he brought the bill to make North Dakota more attractive for data centers looking to relocate. He said he had precision agriculture, drones, banking, finance and jobs for North Dakota college and university graduates in mind with the bill. 

North Dakota’s cold climate and a reliable source of electricity in the state are draws for data center companies, Sen. Mark Weber, R-Casselton, said Wednesday. North Dakota is “on the radar” across the U.S. for data centers, he said. 

“I’m wondering if the time at the next legislative session is to have some of this discussion,” Weber said. “Are we – I don’t want to say giving away the store, but I think it warrants some discussion amongst all of us.” 

Data center developers have emphasized the significant property taxes they pay to local communities as a benefit to the state.

In addition, data centers also created or retained 332 permanent jobs from 2021 to 2025, Kroshus said.

Data center companies evaluate states for years prior to locating their projects, said Matt Marshall, an economic development manager with Minnkota Power Cooperative.

“They’re looking at lots of different metrics, and by the time we get the call, you’d be amazed at how educated they are about our area,” Marshall told the panel. 

North Dakota has a number of data centers, including ones built near Ellendale and Williston, under construction near Harwood or in planning stages near Mandan and Center.

Data centers have drawn scrutiny and criticism from citizens for their size, water usage, noise and other factors.

No pause on data centers but North Dakota special session to debate nondisclosure deals

In its upcoming special session, North Dakota’s Republican-led Legislature will consider a bill to temporarily ban nondisclosure agreements between industrial projects and government officials. Critics say those agreements keep the public in the dark about data center projects.

At least 38 states offer a dedicated tax exemption or incentive for data centers, some dating back to the early 2000s, said Nicholas Miller, a policy associate with the National Conference of State Legislatures’ Fiscal Affairs Program, who presented to the panel.

States see jobs, economic benefits and property tax revenue as reasons to create the incentives, though some states have considered walking back or adding requirements to their incentives, Miller said. Concerns related to data centers’ energy use and water use and the loss of tax revenue might be why some states are pumping the brakes on their incentives, he said.

“And I think increasingly data centers are a hot topic just in general,” Miller told the panel.

The data center presentations will be helpful for lawmakers in their upcoming special session and in the 2027 Legislature, said committee chair Sen. Brad Bekkedahl, R-Williston. He pointed to community benefit agreements with developers as one potential topic.

“They need to engage the communities. They need to provide a direct benefit to the communities,” Bekkedahl told the North Dakota Monitor. “They’ve talked about property tax benefits, but there’s other things involved with that as well.” 

North Dakota Monitor reporter Jack Dura can be reached at [email protected].